TaxTMI 
TaxTMI 
2023 (10) TMI 1310
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....,078 1. On the facts and circumstances of the case and in law, the order passed under section 143(3) r.w.s. 144C of the Income Tax Act, 1961 (the Act") by the Ld. AO is erroneous and bad in law; 2. The Ld AO/TPO/Hon'ble DRP has erred in upholding transfer pricing addition of INR 2,02,60,078 on account of an adjustment to Arms Length Price (ALP) of the international transaction pertaining to payment of interest on FCCDs by the Appellant to its associated enterprise ("AE"), 3. The Ld AO/ITO/Hon'ble DRP erred rejecting benchmarking approach as per Transfer pricing documentation and disregarded judicial precedents relied upon by the Appellant to justify ALP of interest on FCCDs in accordance with Chapter X of the Act. 4. The Ld AD/Hon'ble DRP erred in considering issue of FCCDs as quasi-equity in nature and accepted arbitrary selection of purported comparable instruments by Ld. TPO without cognizance to various comparability factors such as date of issue, type of instrument, issue size, security, tenor, credit rating, etc.; 5. The Ld AO/Hon'ble DRP erred in rejecting the additional analysis submitted by the Appellant based on....
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....ed in the business of real estate development. 3. In the case reference u/s 92CA(1) of the Act was made to Transfer Pricing Officer vide letter dated 18.09.2019 by the assessing officer. The reference has been made for determination of arm's length price in respect of the transaction entered into by the assessee with its associated enterprise as reported in Form 3C EB filed by the assessee. Vide order dated 29.01.2021 passed u/s 92CA(3) of the Act, the TPO has made an adjustment of Rs. 202,60,078/- in relation to the international transactions reported by the assessee in Form 3CEB with its associated enterprises relevant to assessment year 2017-18. 4. The assessee has filed objections before the Dispute Resolution Panel against the variation proposed by the assessing officer in the draft assessment order of Rs.202,60,078/- as a TP adjustment holding that the international transaction of payment of interest of FCCDs to the assessee from its AE was not at arm's length. The DRP vide directions u/s 144C(5) of the Act dated 29.12.2021 rejected the objections filed by the assessee. The assessing officer has passed final assessment order u/s 143(3) on 23.02.2022 and total income was....
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....sing officer has issued this notice of demand to the assessee company along with draft assessment order on 17.03.2021 directing the assessee that for the assessment year 2017-18 a sum of Rs. 101,06,120/ - has been determined to be payable by the assessee. The relevant part of the notice of demand is reproduced as under: 8. The ld. Counsel has also filed copy of computation sheet dated 17.03.2021 as per which the total demand payable of Rs. 101,06,122/ - was determined on the basis of draft assessment order for which the impugned demand notice as referred above was issued to the asses see. It is evident from the above that assessing officer has passed the draft assessment order on 17.03.2021 and also issued notice of demand u/s 156 along with computation sheet dated 17.03.2021. These facts demonstrate that assessing officer has not followed the mandatory provisions of Sec. 144C of the Act while issuing draft assessment order along with demand notice and computation sheet in the case of the assessee. In this regard, we have perused the decision of Hon'ble High Court of Karnataka in the case of CIT(IT) Vs. Cisco Systems Services B.V. (2023) 149 taxman.com 486 (Karnataka) wherein he....
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....ons before the Dispute Resolution Panel. Thereafter, the AO proceeded to calculate tax in the same order directing to "Issue demand notice and challan accordingly after giving credit to prepaid taxes, if any' and further directing to `Issue notice u/s. 274 r.w.s. 271(1)(c) of the I.T. Act, 1961". A demand notice dated 29-12-2011 was also simultaneously issued, a copy of which has been placed on record by the ld. AR. Then, the AO issued penalty notice u/s. 274 r.w.s. 271(1)(c) of the Act, again, on 29-12-2012, whose copy has also been placed on record. Thereafter, the AO passed the final assessment order dated 27-02-2012 u/s. 143(3) r.w.s. 144C of the Act determining total income at Rs. 156.73 crore. 8. From the above factual matrix, it is seen that the AO passed the draft order by designating it as the "Assessment order" u/s 143(3) of the Act on 29-12-2011 and also issued notice of demand u/s. 156 along with initiation of the penalty proceedings. Thereafter, he passed the final assessment order again characterizing it as `Assessment order' on 27-2-2012. Under such circumstances, the assessee has raised the issue that the final assessment order lacked validity and ....
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....ion in the income as per the draft order, to the extent specified in the provision, that the AO is obliged to pass an assessment order, either under sub-section (3) or (13) of section 144C of the Act, determining the tax liability, pursuant to which a notice of demand is issued. Thus it follows that, irrespective of the course of action followed by the assessee, whether or not accepting the variation in the draft order or choosing the route of the DRP or the CIT(A), a draft order has to be necessarily followed by an assessment order on the basis of which a notice of demand is issued and it is then that the assessment is said to have come to an end. 11. The Hon'ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC) has held that assessment order involves determination of income and tax. It laid down that: 'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former.' Again the Hon'ble Summit Court in Auto and Metal Engineers vs. UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income un....
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....d the matter to the AO on the ground that the DRP failed to deal with the assessee's objections. During the remand proceedings, a reference was made to the TPO. On receipt of the TPO's order, the AO straightaway passed an order u/s. 143(3) r.w.s. 144C(13), which action came to be disapproved by the Hon'ble High Court. It, ergo, follows that the statutorily mandated procedure must be adhered to by the authorities, non-observance of which renders the assessment order null and void. 14. Similar issue came up for consideration before the Pune Benches of the Tribunal in Skoda Auto India Ltd. Vs. ACIT. In that case also the AO passed the draft order and simultaneously issued notice of demand and initiated penalty proceedings by issuing notice u/s 274 of the Act. It was thereafter that the final assessment order was passed. The assessee challenged the legality of the final assessment order. Vide its order dated 02-07-2019, the Tribunal in ITA No. 714/PUN/2011 has held that the demand got crystallised on passing of the draft order pursuant to issue of demand notice which is contrary to the relevant provision of the Act. Ex Consequent, the draft order was held to be invalid in law ....
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....its order dated 21.08.2019 did not accept the contention of the assessee to the effect that the assessment got concluded on the passing of the draft order and hence the final assessment order was a nullity. It is an altogether different matter that the initiation of penalty through the draft order carried some infirmity, but that would not impinge upon the validity of the assessment order. 18. To sum up, we set-aside the assessment order by declaring it to be null and void. Thus, the income offered in the return becomes total income of the assessee." 021. We do not find any reason to multiply the several judicial precedents on the facts of the present case. Therefore, respectfully following the decision of the coordinate bench, we also hold that the present assessment order passed is null and void. Thus, the income offered in the return becomes total income of the assessee." We have also perused the decision of coordinate bench of the ITAT on similar issue and identical facts in the case of Marriott International Licensing Company BV Vs. DCIT(IT) 3(2)(1) as referred supra in this order. The relevant part of the decision is reproduced as under: "10. We ....
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....ld also place our reliance on the decision of the co- ordinate bench in the case of Atlas Copco (India) Limited (supra), which held that the issuance of notice of demand at the stage of draft order has brought a finality to the assessment at the stage of the draft order itself and the resultant final assessment is vitiated in law and is unsustainable. 12. From the above observation, we are of the considered view that the assessment order passed subsequent to the issue of draft assessment order along with the demand notice has been held to be bad in law and not just mere procedural defect. On a perusal of the above decision cited, the issue in hand is identical to the said decisions and we hereby hold that the assessment order dated 14.02.2017 to be null and void." 9. In the light of the above facts and material placed on record, we find that assessing officer has failed to follow the mandatory procedure laid down u/s 144C of the Act at the stage of passing draft assessment order, therefore, following the decision of Hon'ble High Court and coordinate bench of ITAT as discussed supra we are of the considered view that final assessment order passed is null and void as the ....